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Reviewing economic stability of Pakistan

Pakistan got independence from the British Raj in 1947, but a review of the economic progress of over 70 years reveals some very disappointing facts. The worst has been the conversion of East Pakistan into Bangladesh, the biggest dent to the two nation theory that culminated at the creation of the first country on the basis of an ideology. The early death of Quaid-e-Azam, Mohammad Ali Jinnah, assassination of Liaquat Ali Khan, three marshal laws, shamble democracy and dismal economic growth have pushed Pakistan far behind those countries which got independence much later.

The dismal performance can be attributed to a number of factors that include: 1) the country has been following the foreign policy agenda of the United States, 2) economic policies have been dictated by the multilateral institutions, especially International Monetary Fund, 3) policy planners following dictate of the multilateral lenders rather than developing any home grown plan and 4) the nation fragmenting into groups on the basis cast, creed and religion. All these factors provide opportunities to the external powers to form various rebel groups in Pakistan, provide them arms and funds and push the country towards anarchy and 5) ultimately pave way for the external powers to initiate proxy war in Pakistan.

Earlier in these pages it has been highlighted that Pakistan is inching towards default on its debt servicing. The ruling junta continues to portray that there will be no need to approach the IMF to seek its assistance to overcome balance of payment crisis. However, opposition parties are openly demanding imposition of financial emergency in the country. Since the financial emergency has to be proclaimed by the President of Pakistan, many analysts wonder will he be able to reign in prime minister and cabinet members belonging to his own party. Some critics say, if the former president, Farooq Leghari can dismiss the government of his party chief, Benazir Bhutto, the precedence demands President, Mamnoon Hussain to impose financial emergency, at least.

In one of the recent television programs, Saleem Manviwala, Chairman, Senate Standing Committee on Finance, along with demanding imposition of financial emergency, insisted on the resignation of Finance Minister, Ishaq Dar. His demand was seconded by two other participants namely Arif Alvi of Pakistan Tehreek-e-Insaf (PTI) and a defense analyst, Shahid Lateef. They openly said that multilateral donors have declined to meet the finance minister and any further delay in his resignation could prove injurious for Pakistan.

One of the economic analysts said that Pakistan continues to suffer from the worst weakness that is heavy reliance on multilateral lenders, even to meet the current account deficit. The outcome is that economic policies of the country are dictated by the lenders. Over the years the government has been gradually cutting the subsidies paid on wheat, staple food of the country and POL products, driving engine of the economy. On top of all GST has been imposed on locally produced urea, which makes indigenously produced nutrient expensive as compared to the imported on. One also fails to understand the logic behind offering subsidy on urea and sugar export but no reduction in GST that could benefit the local consumers.

The successive governments have failed in boosting share of manufacturing sector. Pakistan remains an agro-based country and nearly 60 percent of its export proceeds are earned by textiles and clothing. Despite Pakistan among the top five cotton producing countries, its share in international trade of textiles and clothing remains less than 3 percent. Textiles and clothing industry in Pakistan had thrived under the quota regime, but after phasing out of this system, fails in competing in the global markets. Lately, European Union had granted Pakistan GSP Plus status. However, the country failed in reaping any benefit from incentive due to heavy load shedding and high electrifies and gas tariffs. Instead of controlling blatant theft of electricity and gas, the government has been persistently raising electricity and gas tariffs, which offers further incentive to the pilfers of electricity and gas. The result is that while the pilferers continue to enjoy cost of free energy products, those paying their bills in full and on time, have to pay the bills through their nose.

One of the common complaints of policy planners is that the number of tax payers is pathetically low. However, they tend to forget that even the poorest person is paying tax indirectly. It may not be wrong to say that FBR keeps its eyes closed because NADRA data clearly provide the details of tax evaders. On top of all most of the MNAs and MPAs belong to the groups of elites called ‘waderas’, who have not been paying tax on their income from agriculture. This in complete violation of cardinal rule that all sorts of income should be taxed irrespective of the source. Since many of the ‘waderas’ have also joined the group of industrial elite, they also club all sorts of income under ‘Income from Agriculture’ and manage to evade tax payment.

The recent report of State Bank of Pakistan (SBP) should be an eye opener for all the Pakistanis, which say that pressure on external and fiscal accounts is expected to emanate from rising debt serving and imports and spending by provincial governments in particular. Analysts are of the opinion that the ruling junta is spending more time in discussing non-issues rather than coming up with the plans to overcome the twin deficits. The situation is getting real alarming because now reports of multilateral financial institutions are being disputed. In a recent statement, spokesman for the Finance Ministry said that the World Bank report is a misstatement of performance of external account for the two months of current fiscal year.

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